Rates Rising For TIC Loans

For those that aren’t quite aware, there is this great little invention called email that allows you to send questions, comments, topics directly to us. The email is thefrontsteps@gmail.com. Go ahead, give it a try. ;-)

This is so way off topic, that I sincerely apologize in advance, but we had a thread last week regarding TICs and whether or not they were more risky. Fluj said that banks like Sterling were doing quite well with fractional loans, so I wanted to point out an article in [11/12/2008] WSJ:

Sterling Bank & Trust FSB recently raised its rate for TIC loans to 7.75% — a loan for a similarly priced condo would require only 6% to 6.25% interest — and now requires a down payment of at least 20% of the purchase price. Other banks are now requiring 30% down. In the past, lenders required buyers to put 10% down.

Residential TIC loans “are definitely more risky,” says Richard Yurich, a loan officer at Sterling Bank. “Once we make the loan it’s ours; nobody wants to buy them.” His bank raised rates and requires more money down to protect itself from a bad investment, he says.

There is another catch: There are no fixed-rate loans for TICs, meaning that buyers are forced to accept new terms after three to five years. This wasn’t a holdup when property values were increasing and mortgage rates were trending down, says Glenn Rodriguez, a mortgage broker. “That’s where we’ve lost a lot of the buyers over the last couple of months,” he says. “People are worried.”

Just sayin’.

You are forgiven for “just sayin'”, because we can’t even find that thread you were talking about (truth be told, we didn’t look that hard), but thanks for sharing and thanks for reading!

TICs were always more expensive, and always portfolio loans. I said, “I’m told,” as it was a Sterling Bank employee who told me about them being offered. Last, I think I was responding to someone saying that TIC loans were going to go away all together?